Let the free market ‘invisible hand’ distribute water

As Ronald Reagan once said: “The nine most terrifying words in the English language are: I’m from the government, and I’m here to help.”

Those words came unbidden to mind when a gaggle of government satraps gathered in Carson City to discuss how best to dole out water during this drought.

The drought forum was set up by Gov. Brian Sandoval, who asked its participants to recommend how to deal with the ongoing water shortage.

The most frightening thing reported out of the session was talk about changing the state’s water law.

“I think ultimately water rights management has to evolve from the strict prior appropriation to more of a paradigm of shared risk,” John Entsminger, general manager of Southern Nevada Water Authority, was quoted as saying.

The first Nevada water law was passed in 1866 and recognized the vital role mining was playing in the state’s economic growth. Though all water within the state is subject to state regulations and controls, the law recognizes the basic principles of prior appropriation and beneficial use.

First in time is first in right.

But then those with the rights must use it or lose it. The holders of those rights may not speculate in water rights or hold on to water rights they do not put to beneficial use in a timely manner. “If they stop using the water, they will lose the water right,” the Nevada Department of Conservation and Natural Resources explains.

But water is a property right, and as such it may be bought and sold.

At the drought confab, according to press accounts, some questioned this concept and asked whether giving water right holders access to water at the expense of others in times of drought benefits the public good — whatever that means.

There appeared to be a sentiment for treating water as a communal commodity to be distributed by some government agency — to each according to their needs?

But just as water seeks its own level, so too free markets seek and find the fairest and lowest price and widest distribution for any commodity.

Murray Rothbard, one-time UNLV professor of economics, once wrote: “If the government wants to conserve water and lessen its use, all it need do is raise the price. It doesn’t have to order an end to this or that use, set priorities, or decide who should be allowed to drink more than three glasses a day. All it has to do is clear the market, and let people conserve each in his own way and at his own pace.

“In the longer run, what the government should do is privatize the water supply, and let water be supplied, like oil or Pepsi-Cola, by private firms trying to make a profit and to satisfy and court consumers, and not to gain power by making them suffer.”

This was echoed by newspaper columnist and economist Thomas Sowell in his book “Basic Economics”: “There is no need for government officials to decide arbitrarily — and categorically — whether it is a good thing or a bad thing for particular crops to be grown in California with water artificially supplied below cost from federal irrigation projects. Such questions can be decided incrementally, by those directly confronting the alternatives, through price competition in a free market.”

Creating a free market for water would encourage innovation and efficiency, allowing water to flow from low-value uses to high-value uses while providing both parties of the transaction a profit.

Public officials should resist the urge to “manage” the water supply and permit the free market to apply its “invisible hand.” — TM